Business Solutions

Cost of Possession

There are 16 hidden cost factors associated with a company's inventory value.  What are these 16 elements?  They can be broken into 5 basic categories: Housing Costs, Capital Costs, Scrap Costs, Equipment Costs, and Manpower Costs.  The 16 elements are outlined below:

Housing Costs

1. Building Depreciation

2. Building Operating Costs

3. Taxes

4. Insurance

Capital Costs

5. Cost of Borrowing

6. Inventory Taxes

7. Inventory Insurance

8. Material Obsolescence

Scrap Costs

9. Scrap Loss

Equipment Costs

10. Materials Handling Equipment Depreciation

11. Pre-production Processing Equipment Depreciation

12. Electric Power and Special Supplies

Manpower Costs

14. Labor (receiving and stacking)

15. Labor (moving metals to processing area)

16. Labor (pre-production processing)

Depending on interest rates, building size and space efficiencies, utilities costs, inventory level, and labor rates, these 16 "hidden" costs could range from 20% to 45% of your inventory value. 

In light of the above calculation, doesn't it make sense for Titanium Industries to provide you with material Just-in-Time, or as an added value product like cut to length pieces?  We challenge you to do the math and you will see that there is no doubt that letting us handle and manage your inventory, and letting us provide you with an added value product will generate double digit savings. Please contact us for a discussion about your hidden costs.